Not having a decent deposit is one of the main issues that prevent new property investors from entering the market. However, there are ways you can get on the investment property ladder with little money down.
Property investment is a fantastic way to make money – once you get started. It usually requires some initial capital, but it is not impossible without it. Although lenders may view you as a high-risk borrower, there are ways around it.
Start where you are, with what you have
Start saving straight away. Put as much away as you can in a savings account and try to save at least 10% as a deposit. Showing you having regular payments into your savings account will prove to the bank or lender that you are capable of saving and will increase your chances of being approved.
Look at your current equity
If you already own the house you live in, you may be able to tap into the equity of that home to fund your investment property. By drawing upon the equity in your existing home, you can buy into your first investment property with a smaller mortgage, and in the eyes of your lender you will have reduced your risk as a borrower.
Investigate investment partnerships
It is better to own 50% of something than 100% of nothing. Consider investing with a friend or family member to get on the property ladder. It is important to get a co-ownership agreement drawn up to avoid disputes between co-owners. Consider things like setting up a sinking fund to cover repairs and periods when the property is vacant, a plan to pay for unforeseen maintenance costs and how insurance issues will be handled.
Help someone else out of a sticky situation
Another way to get on the property ladder can be to use your saved deposit to solve someone’s problem in exchange for a portion or the whole of a property. For example, if someone is in trouble paying their current mortgage, if they sell the property now, they are not going to have much money left or even run the risk of losing money. If you offer them a sum to pay for their outstanding debt and take over their mortgage, you could get your hand on a property that otherwise will be out of your reach. This method, although not ideal, allows you to have the control but not ownership, and enjoy all the financial benefit of an investment property.
What other tips can you recommend to help a person get on the property ladder with limited funds?